Problem:
A bond's credit rating provides a guide to its risk. Long-term bonds rated Aa currently offer yields to maturity (YTM) of 4.3%. A-rated bonds sell at yields (YTM) of 3.6%. Assume a 10-year bond with a coupon rate of 5% is downgraded by Moodys from Aa to A rating.
Requirement:
Question 1: Calculate the new price.
Question 2: What's the new current yield?
Note: Provide support for your rationale.